BREAKINGVIEWS-New Delhi bowls Rupert Murdoch a bouncer

Reuters Staff

4 Min Read

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

By Una Galani

MUMBAI, Dec 4 (Reuters Breakingviews) - Cricket is religion in India and new convert Rupert Murdoch could soon lose the faith. His Star India agreed in September to pay an extraordinary $2.5 billion for rights to the Indian Premier League through 2022. There is now a chance the matches will be deemed of “national importance,” according to local media reports, which would force them to be shared with state broadcaster Doordarshan. That might score the government some points, but for the media mogul it would be a sticky wicket.

The country requires pay-TV to share certain sports rights, usually ones where the national team is playing. The 10-year old IPL has never featured on the list because it’s a private commercial venture, like England’s top soccer league. The most recent review by New Delhi, completed in January, excluded the IPL.

Star aims to generate $500 million of EBITDA in 2018. Making the lucrative IPL more accessible will upset an ambitious investment in a tightly regulated market. Channel prices have essentially been frozen since 2003. If the cricket is not exclusive, customers are bound to watch for free rather than pay. Star also would lose potential revenue it might have earned from selling on the rights.

What’s more, India’s rules mean Star might be obliged to give its rival 25 percent of related advertising sales. Although allowing the IPL to be shown free could expand viewership by almost one fifth to just under 200 million households, the enlarged audience will mostly be poor and won’t command the same sponsorship rates. UBS reckons previous rights owner Sony only earned $200 million last season.

Making cricket free might help shore up political support in Gujarat. Upcoming polls in the state will be a barometer for Prime Minister Narendra Modi’s popularity ahead of national elections. It could sour the climate for foreign direct investment, however. The whole affair echoes a still-unresolved case where India retroactively changed tax rules to try collect fees from Vodafone’s 2007 acquisition of local assets.

For Murdoch, this bowls a bouncer into talks with Walt Disney and other suitors interested in buying large parts of his Twenty-First Century Fox empire, including overseas assets such as Star. He will need India to play the long game.

CONTEXT NEWS

- India’s government is working on a proposal to make the Indian Premier League (IPL) for cricket available on a free-to-air public service broadcaster, the Economic Times reported on Nov. 30 citing multiple unnamed sources.

- The Information and Broadcasting ministry wants the IPL to be available on state-owned Doordarshan, the news outlet said. India requires private broadcasters to share access to sporting events deemed to be of “national importance”.

- In September, Star India, part of New York-listed Twenty-First Century Fox, agreed to pay 163 billion rupees ($2.5 billion) for the television and digital rights to the IPL.

- Comcast and Verizon have approached Fox to express interest in buying big portions of its film and television business, Reuters reported on Nov. 16, citing unnamed sources.

- On Nov. 6, CNBC reported that Walt Disney had held talks with Fox about buying most of its movie and cable TV assets, and its 39 percent stake in European satellite broadcaster Sky. According to a Dec. 2 report by the Wall Street Journal, Disney has restarted talks with Fox.